Wrong claims in IT Returns and its repercussions

Mr Ramakrishna is someone I have known since my birth. Last seen in 1987, he is now a healthy 92-year-old chain smoker, consuming a pack of cigarettes daily. (I often wonder had he invested in ITC shares instead of cigarettes, he would have been owning a luxurious car and a mansion today!)  However, this doesn’t imply that smoking is not injurious to health.

Mr Mahesh visited us to file IT returns. According to him, his neighbour, Mr Radhakrishna receives a monthly rent of 1,50,000, but only declares Rs.30,000 rent per month in IT returns. Even then, he is not on the radar of the IT department. Does this mean that non-disclosure or wrong filing provides an advantage in tax matters?

In my opinion, both Ramakrishna and Radhakrishna are lucky and they are in the exceptional category. They are certainly not the role models to follow. We have been taught to follow the rules to the extent possible and also not to violate the regulations knowingly.

Unreasonable Expense Claims:

Recently, the Income Tax Department issued notices to employees claiming excessive and unreasonable expenses to lower their tax liability. Some individuals have shown exorbitant Leave Travel Concession (LTC) expenses, something like Rs.5,00,000 towards airfare to travel within India. Similarly, inflated telephone bills and fake Mediclaim insurance claims have also been observed.

In another case, we computed the taxes payable amounting to Rs.2,16,000. However, just 30 minutes later, we received a notification that the client’s return had been filed. Out of curiosity, we checked her filing and were taken aback to discover that, instead of paying the taxes owed, she had claimed a refund of Rs.68,000. This can only be possible through bogus claims.

Repercussions

Those who engage in making false claims during IT filing, often lack awareness of the severe repercussions. In our office, we have witnessed numerous cases where taxpayers, including salaried employees, face significant tax demands amounting to lakhs of rupees towards interest and penalties. Perhaps, those who engage in malpractices are unaware of the consequences until they receive notices from the tax authorities. Witnessing such situations, we can’t help but feel a sense of regret for them.

Taking Corrective Action:

So, friends, it is crucial to refrain from engaging in wrongful practices when filing tax returns. If you or anyone you know has made such errors or wrong claims in the recently concluded tax filing, consider taking corrective action promptly. By filing a revised return disclosing income and expenses accurately, you can still rectify the situation and pay any additional taxes by the deadline of 31st December 2023. After this window, if caught, there are very limited options to save from the additional taxes, interest and penalty.

 

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 28+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional, Registered Valuer (F&SA) and Social Auditor.Prasad welcomes your comments and questions. Please email him at simplifiedlaws20@gmail.com

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